Seeking Foundation Funds: How Changing Environment Means Smarter Asks

My colleagues and I have the honor and pleasure of serving nonprofits on three continents. We listen carefully to the needs and expectations of every nonprofit, and we prepare carefully tailored plans and solutions that will enable each nonprofit to meet their goals. That includes a multifaceted, multi-channel effort that opens up the maximal possibilities for each organization.

One of the most common questions that often comes our way is the desire to focus the fund development efforts on foundations in lieu of creating a broader and more encompassing platform. Build lists of foundation prospects, make connections to trustees and draw down funding…if only it were so simple.

We have deep respect for foundations and their role in the philanthropic marketplace, representing the dedication of philanthropists and their families to solve problems. But, like most other “pieces of a puzzle,” pursuit of foundation support must be part of a strategic approach.

As a percentage of total support, giving by foundations has climbed in recent years. It now compromises 11% of total giving in 2015, according to recent numbers by Giving USA. Giving by foundations as a total dollar amount has also risen. This giving source has not declined in the last 40 years. In fact, in real dollar terms, foundations represented $42.26 billion last year in philanthropic donations. Looking at these numbers, and the relative ease of filling out an online application, many nonprofits have come to think that Foundation support is the golden ticket to funding programs, offsetting operating costs and driving fundraising in general. However, these numbers only tell a part of the larger story.

Though foundations are giving more, they aren’t necessarily funding more projects or more nonprofits. According to the Foundation Center, of the more than 86,000 independent, community, and corporate foundations in the United States, more than 70 percent state that they do not accept unsolicited proposals. With many applications online, the number of submissions for those foundations that do accept applications has risen as well. Rachel Monroe, the President and CEO of the Weinberg Foundation, which welcomes initial approaches through an LOI, explains, “We see applications to fund more than $1 billion a year. We can only fund less than 10% of applications.” Even those that do accept applications are often inundated with submissions.

Another phenomenon is that larger foundations are becoming more professionalized. With a better planning process comes less room for discretion and flexibility. One trustee remarked, “For many foundations, there is a tension between planning and flexibility.” This wrestling match may result in difficulty for new nonprofits to break in, establish relationships, and be considered. They often find themselves competing with established loyalties between trustees and certain nonprofits that have been receiving funds on a longstanding basis.

The types of projects that are being funded have also changed within recent years. As one large foundation trustee illustrates, “More and more foundations today want to deal with the roots of challenges and problems, rather than just treat the symptoms. Foundations are seeking programs that can show outcomes. Often this leads to fewer, but larger grants.” This means that while foundation giving is increasing, and those dollars may generate greater and more defined results, the impact is felt by fewer nonprofits, rather than being spread among many. With the number of 501(c)3 organizations increasing 6% from 2014 to 2015, there are naturally more nonprofits looking for a share of the support.

In addition, there has been a shift to strategic support, and more careful funding of projects and specific programs that achieve an objective shared between the foundation and the fundee, rather than general operating funds. Giving USA reports, “Foundation giving for general nonprofit support has slowed from 42% to 37% while giving for specific purposes as increased from 58% to 63%. This restricted income can help nonprofits with their programs but might leave them scrambling to pay salaries, postage and keeping the lights on.

What can nonprofits do?

Do your homework. Foundations support programs that align with their mission and strategic view. The deeper that nonprofits can align with that mission, the better chance of getting funded. It is best to know who the trustees are, their backgrounds and interests, and the foundation’s history of past funding before the application or LOI is begun. Read the materials on the website and set up a call with a trustee or program officer.

Do not be intimidated. According to one prominent Foundation president, “Don’t be intimidated by the process. Good proposals are part of the process and helps foundations to meet their mission.” Staff are often open to answering questions and are appreciative of good programs and new ideas. Open conversation results in better applications and less wasted time and effort invested in proposals that will not be funded.

Be honest. Does your program fit the mission or is this an exercise in throwing things out there to see what sticks?

Take time with the LOI. Make sure that your answers are clear and answer the questions being asked.

Engage Foundations. Rachel Monroe explains, “It is an essential step to contact the staff member that heads the area for which one is applying.” Speaking with staff members helps ensure that the application is on the right track and is aligned correctly.

Show impact and be specific. Foundations are often looking for proven results and that their funds will make things happen. It is important to know what questions to ask. Most foundations are looking to make a specific connection between the program, results and their impact in finding solutions.
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Do not overlook that individual giving is the core to a fundraising plan. Giving by individuals still represents the most effective way for nonprofits to build a solid and growth oriented base of support. Many times the path to a foundation is through a trustee, and relationship building. And foundation support represents only 10% to 15% of sources of philanthropic support for most nonprofits. Individuals are critical to the financial health of any nonprofit and need to be at the core of an organization’s fundraising activity.

Foundations whose mission aligns with organizations’ work can be powerful allies and partners. They can help actualize programs that might not otherwise be funded. With a clear agenda and strategy, foundations can be an essential component to a nonprofits’ financial picture.

My colleagues and I welcome your comments and emails. Let us know what you think. Please feel free to contact us at The Lapin Group at 215-885-1550 or alapin@thelapingroup.com to discuss this further.